Updated: Lara Networks to be acquired by Cypress

Cypress Semiconductor Corp. today announced it has signed a definitive agreement to acquire Lara Networks Inc., a San Jose company specializing in silicon-based packet processing products for wide-area-network (WAN) infrastructure equipment.

Negotiations between the companies were reported earlier, although Kamal Gunsagar, founder and chief executive of Lara, denied to EBN yesterday that Cypress would acquire his company outright.

Total consideration for the transaction is $225 million, to be paid mostly in cash. The acquisition is expected to be dilutive for several quarters and is subject to standard regulatory and shareholder approvals.

Lara's products -- which target routers, switches and multiservice gateways - will complement Cypress' existing WAN product line which includes a variety of physical-layer, framing, programmable-logic, timing-technology and multiport switching devices for networking linecards, according to Cypress officials.

Lara's family of network search engines and network co-processors are used by networking OEMs such as Cisco Systems Inc., Cypress said. The acquisition marks another step in Cypress' move into the communications market.

The arrangement gives Lara the opportunity to expand its customer base by accessing the financial and sales resources available at San Jose-based Cypress, said Lara officials.

"This acquisition, for Cypress, moves forward our efforts to transport Cypress into a communications company," said Christopher Norris, vice president of data communications for Cypress, during a conference with analysts.

Lara generated revenue of $20 million in 2000, according to Cypress officials.

"This year, all the major WAN suppliers are so highly dependent on how the market plays, we don't even want to speculate (revenue projections)," said Emmanuel Hernandez, Cypress' chief financial officer.

Lara Network's technology allows Cypress to offer customers all the parts of the linecard, said Lara President and Chief Operating Officer Jayan Ramankutty, during the meeting with analysts. "We provide you a network switch engine which allows you to look up a complex database with millions of entries...at 100 million transactions per second," Ramankutty said.

Lara Network said its customer list includes Cisco Systems Inc., Ericsson, NEC and Fujitsu. The firm's employees will continue to work in their current locations. Lara Network employees are in San Jose, with a hardware/software design team in Bangalore, India.

The company is a good fit with Cypress, said Bob Merritt, an analyst with Semico Research Corp., Scottsdale, Ariz.

"The industry has shifted toward looking at communications as the lead indicator and driving force in developing new technologies," Merritt said. "The first line of implementing these new technologies is the linecard, the piece that connects from the physical world or transmission side to the semiconductor world of digital communication."